The Rise of the Ethical-Economy
Ethical. Sustainable. Renewable — a new era of products
“The truth is that we live in a very unethical society. We don’t teach ethics at home, schools or university. As a consequence most businesses don’t have a code of ethics or conduct.” — Frank Abagnale
Over the last decade or so we’ve witnessed the rise in the Experience-Economy — a battlefield where companies and products have been competing not on price or features, but rather on who can ‘woo’ their customers best.
Silicon-valley start-ups were early adopters of this economy, many took advantage of it. Delivering compelling experiences fast became the ‘garage-start-up’ go-to secret weapon to overthrow their large organization counterparts — disruption was rampant.
Over time this radically reshaped organizations and the way we deliver products. We saw roles like UX/Product Designers blossom, from once ‘pixels pushers’ to one of the most demanded jobs in the product-tech market today. It’s even gone all the way to the top with the rise of the Chief Customer Officer bringing customer experience into the boardroom.
However, all good things must come to an end, or as Bob Dylan would put it “times they are a-changin’” and although companies will continue to deliver amazing experiences, it is no longer the competitive advantage as it once was.
The Kano Model will remind us that any attribute of a product over time will degrade. Those once delightful innovations will inevitably become your customer’s base expectation — a 10 hour iPhone battery life was once considered amazing but now it’s considered the bare minimum.
This degradation applies to the experience-economy — something which was once innovative will eventually become mundane — take Uber, for example, the ability to watch your ride’s location in real-time at first was an amazing feature but now it has become standard for almost all ride-hailing and delivery products.
The shift has already started. A new economy has begun to form and many companies are already started to take advantage of it!
Rise of the Ethical-Economy
If you look at the top start-up trends, ethics has been on the rise in the last couple of years — Forbes listed ‘Cultural Accountability’ as one of their top start-up trends to watch out for in 2020 — “With this increasingly ‘open’ interaction between brands and consumers comes an expectation for companies to live up to topical discussions around mental health, diversity, and wellness as a whole”.
And the signs are all around us.
Just look at the recent bush fires in Australia which has blown the world into a frenzy over climate change — protests and demands on governments to take action. Some already have, with the implementation of taxes on carbon emissions and others have set renewable energy targets.
If you’re like me, in Australia there’s a good chance that your local supermarket has stopped providing single-use plastic bags and your local barista gives you 20c off your morning coffee when you bring a keep-cup — they may have even ditched using disposable coffee cups altogether!
You’ve probably also noticed, plastic straws in your local bar or restaurant have been replaced with biodegradable ones — you may have even purchased a portable reusable straw yourself.
And it’s not just about sustainability, it’s also corporate ethics too — how companies operate, how their leaders treat their people — this is shifting too.
Consider recent events like the Cambridge Analytica scandal which shook the world in regards to corporate ethics. The scandal showed the world how social media platforms were leveraged to influence elections, this shown a light on numerous ethical concerns from data privacy, human rights and even safeguarding democracy itself.
What does all this mean for us product people?
This is where the economy part comes in. The reach of our hyper-connected world provides consumers with the luxury to be more critical of the companies and products they purchase. The reach of the internet provides consumers with the information and ability to only purchase products from companies whose values (and more critically actions) align to their own.
1. More Disruption
This shift in consumer behaviour creates space for disruption — we saw this with the experience economy, as consumers became more susceptible to delightful experiences it allowed garage-start-ups to distinguish themselves, and in some cases overthrow their multi-billion dollar counterparts. The ethical-economy will be no different.
We are already seeing a new wave of innovative start-ups centred around ethics. Something which has recently come out of my very own sunny Australia is a company called OpenSC. As part of a collaboration between WWF Australia and BCG Digital Ventures, OpenSC is a supply chain transparency platform. Their product is simply information on how ethical companies within the supply chain you use are.
“In simple terms, we help people and businesses to avoid illegal, environmentally-damaging or unethical products.” — Markus Mutz, CEO OpenSC
The interesting thing here is how the ethical-economy facilitates the creation of companies like OpenSC — ones whose sole business model is centred around ethics. This is largely due to the shift in consumer behaviour that I mentioned before.
OpenSC CEO, Markus Mutz Ted talk on ‘How Supply Chain Transparency Can Help The Planet’
However, a shift in consumer behaviour is only the beginning. A unique attribute of the ethical-economy is how such a shift will amount to social pressure for government bodies to adjust laws and impose regulations. As a result, entire industries are set to change.
This is already been happening, predominately in the energy industry but it will become more widespread — society will continue to demand greater accountability of companies when it comes to ethical and sustainable behaviour.
New laws and regulations are a kind of ‘mandatory disruption’ that we did not see in the experience-economy. Depending on the industry you are in, you may be more susceptible to this than others. As I mentioned the energy industry is already going through an entire overhaul as a result of the ethical-economy — the motor industry too, with the rise of electric cars and alternative transport like e-bikes.
Regardless of whether you will be disrupted by innovative startups like OpenSC or whether you’re vulnerable to a change in legislation, like with all new economies, there is a clear need to adapt. Perhaps ask yourself, “are you going to be the disruptor or the disrupted in this new economy?”
2. More Responsibility
As technology continues to infiltrate our lives, its impact are amplified. As the people responsible for shaping these products we carry an immense amount of responsibility on our shoulders — we are the last line of defence for unethical product decisions.
Radical Product Thinking evangelist Radhika Dutt provokes the powerful question of whether this increase in responsibility requires Product Leaders to have a Hippocratic oath like medical doctors are required to take.
“There has been a call for more regulations to protect consumer well-being. But regulations will always play catch up — we’re still learning about how technology is affecting society and the pace at which we’re releasing products is unprecedented. Regulations also take years to put in place. In the meantime, we’re creating changes and unintended consequences that affect millions of people.” — Radhika Dutt
Perhaps. Especially when you consider the rise of products such as self-driving cars, AI, etc — they certainly support a case for a product version of the Hippocratic oath.
Unfortunately, ethics are often emergent — it’s only after a social media platform, initially created to connect college students is abused to sway an election that we start to ask questions and set laws. This perhaps is the hardest part of this new economy to navigate — how do you mitigate against these kinds of disastrous unintended consequences?
All the way to the top — Facebook CEO Mark Zuckerberg is held to account by Congress on Cambridge data scandal
Introducing the ‘Mum Test’
Although often used interchangeably, morals vs ethics are two different concepts.
- Ethics are external, they refer to rules and laws set up external bodies. e.g. laws, codes of conduct, company values, etc.
- Morals, however, are internal, they are an individual’s own principles and values, one’s inner compass for right vs wrong.
As mentioned before, ethics is emergent meaning that we cannot simply rely on laws and regulations to guide our decision making — rather we must rely on our own moral compass. It’s likely that until disaster strikes there will be no one to tell us if what we’re doing is right or not, we must find a way to guide ourselves — this is where the ‘Mum Test’ comes in.
The ‘Mum Test’ is simple. When you are about to make a decision, do something — say building a new product — consider how proud you’d be to tell your mum about it? — would she approve? This is an extremely easy to use moral decision-making framework.
Late last year I sat down with Jay Stansell on his podcast and we spoke about a banking app that was designed for children. From one point of view, this is a great idea, they’re built a fun way for kids to develop healthy financial habits from an early age. However, another point of view could be that they build this product because they know 40% of people are likely to stay with the same bank as they signed up for as a child, and the product is a strategy to exploit young families to make the switch, specifically targeting their children because of their high customer-lifetime-value — two very different motives for doing the same thing.
If I was to apply the ‘Mum Test’ to this — I know I’d be super proud and excited to tell my mum about how I’m helping to give the next generation financial freedom…but the other around increasing revenue through exploiting kid’s high customer-lifetime-value…that not so much!
But what about when something bad happens unintentionally?
As they say, “the road to hell is paved with good intentions” — I’m sure the co-founders of Instagram never intended their photo-sharing platform to become “the worst social media network for mental health and wellbeing”.
And the truth is that no one can foresee all the consequences of their decisions. This is just part of the weight we bear for working in product. But what we do have control over is how we react and deal with it when these kinds of things happen.
Being able to take responsibility is part of being a good leader, and when bad things happen that’s exactly what great leaders do — they own it, apologize and get to work on rectifying it.
This increase of responsibility in the ethical-economy doesn’t mean we should be paralyzed by fear — no one can predict the future and completely avoid anything bad happening. That would be impossible. Rather we can use tools like the ‘Mum Test’ to guide our decision making and when something bad does happen, we must be ready to assume responsibility and fix it.
The ethical-economy will be disruptive, it will likely bring levels of disruption that we did not see in the experience-economy as laws change and governments reshape entire industries.
But I do believe this new economy is an extremely positive step for the world. Like I mentioned before, we have always had this ethical responsibility, but it’s only now that we are seeing an increase in scrutiny and accountability towards it. This then ultimately drives the economy part of the equation and forces companies’ hands to look beyond just profits.
I do also wonder if perhaps we will see a rise in ethical c-suite roles, much like we were in the experience-economy with the rise of the Chief Customer Officer?
In fact, off the back of the recent banking Royal Commission here in Australia, where a number of large financial institutions were investigated for ethical misconduct, there have been calls for such organizations to have a Principal Integrity Officer (also referred to as ‘Chief Ethics/Compliance Officer’). In fact, a number of organizations have since responded and have appointed such a role. In other parts of the world, the likes of Ralph Lauren also recently appointed their first Chief Sustainability Officer — this could soon be a growing trend.
Regardless, this increased accountability is here and will only grow. Some may say, it’s a shame that we need to wait till now but I prefer to think, “it’s better later than never!”
I say bring on the ethical economy! What do you think?